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Einhorn's New Short, DMGT
Posted by: Coeus Capital (IP Logged)
Date: November 6, 2012 04:36PM
David Einhorn’s new bearish position on London-based Daily Mail and General Trust (DMGT:LN) was the biggest short taken by any hedge fund against UK company in light of new regulatory rulings.
The EU had recently instated a rule forcing investors and hedge funds to disclose net short positions, higher than 0.5% and 0.2% respectively, of any company’s issued shares. The new ruling came into effect Nov. 1.
It is interesting to note that Einhorn had a 4.4% short stake in DMGT, the UK’s second-largest selling daily newspaper. However, DMGT’s stock price surged 21% in 2012 alone.
- DMGT is the second largest paper in the UK, with average daily circulation of 1.8 million in September.
- Diversified businesses with portfolio of digital properties and online news distribution, including Euromoney, institutional investor and metal bulletin.
- DMGT generates steady cash flow from operations of more than GBP300 yearly.
- Should have benefited from Olympics in 2012, evidenced by recent share price run.
- High PEG ratio at 2.28x and BVPS of -0.02
- Highly leveraged at gross gearing of 19.48x
- High composition of intangibles/assets of< 0.5x but less acquisitive over the years
- Longer secular downtrend with printed publications
- Weaker economy could lead to lower ad revenue
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